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Active income is income for which services have been performed. This includes wages, tips, salaries, commissions, and income from businesses in which there is material participation. Passive or Residual income is an income received on a regular basis, with little effort required to maintain it.

Portfolio income is income from investments, dividends, interest, royalties and capital gains. Portfolio income does not come from passive investments and is not earned through normal business activity. Normally, income from interest on money that's been loaned does not count as portfolio income.

Now, looking at the resources of residual income, we are going to move from the ones which we think will be the most difficult to create to the ones that are the easiest to produce. Here we go.

7. Royalties: the creation of music, books, inventions, machinesand patents. A royalty is something you have sold or created and put it on a platform that you do not run and then receive compensation based on when the item is bought or utilized. Most of us do not possess the potential to rapidly create royalty streams.

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This is the purest type of passive residual income, if you can attain it. .

6. Network Marketing: Network marketing is a unique business model and has created more millionaires than any other business. The industry as a whole is growing and more companies are trying to leverage referrals or direct sales to increase revenue and market products. However, the industry as a whole is confusing to most and requires a tremendous amount of mental and emotional fortitude to make residual income possible.

The effort you have to put in is important to consider. .

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5. Subscription Models: Subscription models/Customer Hubs/Member Places These are businesses like Netflix, Costco, Sams Club. The subscription model has come to be almost its own category. However, it has considerable cost and you have to continuously make and cultivate content and value. The income is remaining and combines loyalty and education with community.

A good book that explains this model of residual income is The automated Customer by John Warrillow. He walks through, in plain English, the various styles of subscription versions and how to potentially apply them to your business.

4. Affiliate marketing: Getting paid to tell folks what you enjoy and showing them where to get it. As a Dad, I tried 3 large seats before finding the Bumbo. Now when I blog about the Bumbo and link to it to my Amazon account, and someone buys it, then I can earn a commission.

A great illustration of this will be Pat Flynn at PassiveIncome.com because he walks you through how to establish your own system to maximize and profit from your passion.

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3. Business: As I mentioned, not all businesses are created equal when it comes to residual income. Lets have a peek at a local taco stand. click here for more info Surethat taco stand might have loyal patrons and make the best damn steak taco youve ever needed, but they also need to wake up every day and turn the lights on and fire up the grill to get paid for their particular tacos. More Info

So, literally I am going to earn a fee if I move in or not. Sure, I have to maintain relationships to keep earning that fee, but truly the income is residual because once I sign up one client I am going to make money off of the money perpetually.

Why do we call these the Power 2 Because these require less specialization and experience, and together with the leveraged use of smart debt, can operate together.

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2. Real Estate: Real estate is #2 for one reason, leverage using intelligent debt and other individuals money. When looking at property rents and the potential for income property provides, it's the trifecta of residual income. First, a house or rental property can enjoy, so capital appreciation is the first long-term benefit of owning a house.

Other men and women are paying off the mortgage, insurance, property taxes and maintenance at the same time you own that piece of real estate. Third, taxation protection. Rental income is taxed at a lower rate than ordinary income and you can depreciate property by taking a newspaper deduction on your annual tax return not to mention expensing the price of mileage, mortgage interest, and upgrades to the home.

The fourth and possibly most hidden, however important benefit is that over time rents grow, protecting your money against inflation, although your mortgage interest can be in a fixed rate potentially. .

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1. The final and most powerful type of residual income, in my opinion, is investing and insurance. Most people have 401Ks and IRAs, therefore I am going to leave that for your investment aspect. Within this, I think our Foundation Freedom Phases is by far the simplest, safest and most powerful tool for several reasons: a.